There are several reasons why companies might choose to underprice:
1. Market Penetration: To quickly gain market share and attract a large number of customers. 2. Customer Acquisition: To draw in new customers who might later become loyal and high-value clients. 3. Competitor Disruption: To disrupt competitors by making it difficult for them to compete on price. 4. Inventory Clearance: To clear out older inventory quickly to make room for new stock. 5. Signaling Quality: Especially in the case of IPOs, underpricing can signal to investors that the company has strong growth potential.